A San Francisco investment firm has launched an attack on Obagi Medical Products Inc., accusing the Long Beach maker of pharmaceutical skin care products of neglecting shareholder interests.
In a letter sent to the board earlier this month, Voce Capital Management LLC demanded the company replace two directors who represent a private-equity firm that no longer has a significant stake in the company and revoke a poison-pill shareholders rights plan meant to discourage a hostile takeover. Voce also wants the company to consider a sale, and added that it believes Obagi has spurned recent buyout overtures.
“The board appears to be preeminently interested in its self-perpetuation and maintenance of its insular and clubby nature,” J. Daniel Plant, Voce managing director, wrote in the letter. He noted that Albert Hummel, a director since 2005 who was named chief executive last year, owns very few shares.
In its response last week, Obagi noted that investors can vote on the shareholders rights plan at the next annual meeting.
“The rights plan was designed to ensure that all of our shareholders receive fair and equal treatment,” the company said.
The meeting hasn’t been scheduled.
Voce is not listed as a significant Obagi shareholder, according to Bloomberg News data, but analysts believe it may be representing other investors. Plant did not return a call for comment.
Analyst Scott Henry at Roth Capital Partners in Newport Beach said he does not believe that Voce intends to make a bid for the company. More likely, the firm hopes to spur interest by other suitors.
The company’s share price, which closed at $11.53 on Feb. 15, was down 11 percent from its 52-week high in May, but up 12 percent from three weeks earlier.
Obagi’s products are often prescribed to patients recovering from cosmetic procedures not covered by insurance, so the company’s products aren’t covered, either, Henry said.
“And while the corporate governance concerns should be a concern to shareholders, these aren’t the worst abuses I’ve seen,” he said.
